Corn Advances as QE3 Boosts Commodities, U.S. Crops Shrink

Sept. 14 (Bloomberg) -- Corn posted the biggest gain in two
weeks after the Federal Reserve announced a third round of
stimulus measures to bolster the U.S. economy, improving
prospects for grain demand as a drought erodes output.

Global equities and commodities jumped after the Fed said
yesterday it will expand holdings of long-term securities with
open-ended purchases of $40 billion of mortgage debt a month.
U.S. corn production in 2012 will slump 13 percent to a six-year
low, after the worst drought in almost six decades hurt crops,
the government said on Sept. 12.

“The Federal Reserve’s action will have a long-lasting
impact because it may revive growth and inflation,” Shawn
McCambridge, a senior grain analyst at Jefferies Bache LLC in
Chicago, said in a telephone interview. “Higher prices can be
sustained because of the smaller U.S. crops this year.”

Corn futures for December delivery advanced 1.1 percent to
close at $7.82 a bushel on the Chicago Board of Trade, the
biggest gain since Aug. 29. The advance pared this week’s loss
to 2.2 percent. The grain has risen 21 percent this year,
reaching a record $8.49 on Aug. 10.

Crude-oil prices climbed to the highest since May,
signaling higher demand for grain-based ethanol in the U.S.,
McCambridge said. Gasoline futures for October delivery are
59.74 cents a gallon higher than ethanol futures in the same
month, the widest premium since May, boosting incentives to
blend more of the corn-based fuel, McCambridge said.

Corn is the biggest U.S. crop, valued at $76.5 billion in
2011, followed by soybeans at $35.8 billion, government figures
show.